Are We Nearing the End for Offline Gambling?

Posted by Harry Kane on Tuesday, March 6, 2018

They say that statistics can be misleading, and this is arguably the case in the world of gambling. After all, the headline numbers suggested that offline gambling continues to account 67% of all activity within the marketplace, while this niche also generated a gross gambling yield of around £9 billion in 2016.

If we delve beyond these impressive figures, however, we see a slightly different picture emerge within the gambling industry. After all, online gambling continues to grow at a vastly disproportionate rate to land-based outlets, while the development of increasingly authentic and immersive platforms is also narrowing the once cavernous gap between corporeal and virtual experiences.

The offline gambling sector is also facing a number of regulatory challenges, which have the potential to hasten its demise in the years to come. In this article, we’ll ask whether we really are nearing the end for offline gambling, and what this may ultimately mean for the industry as a whole.

Why Offline Gambling is Already Disadvantaged

Before we delve into the regulatory challenges faced by offline operators, it’s important to note that these outlets are already at something of a disadvantage in the digital age. Remember, online gambling grew to claim a 33% of the overall market at the end of 2016, and while represents a modern-day peak this number is only likely to increase incrementally over the next few years.

Arguably the biggest challenge facing land-based casinos and high street bookmakers is generational, as the gamblers of tomorrow will grow up with online access to an increasingly diverse range of casino games and sports betting markets at their fingertips.

Future generations will also have an increased affinity with advanced technology such as virtual reality and concepts such as the World Wide Web, meaning that online gaming will be cemented as the dominant channel for players from across the globe.

We’ve already seen this trend take hold during the last decade or so, as Millennials have gradually emerged as the single most dominant and influential consumer demographic. This generation also represents the most tech-savvy group of consumers in history, while they have a strong desire to curate their own content through a variety of online channels. As the influence and spending power of this demographic has risen (its youngest members will become 18 this year), it’s no surprise that online gambling has become increasingly popular and consistently enhanced its market share.

In this respect, land-based casino outlets may already be considered as outdated, even as they strive to evolve and integrate technology to create a more interactive experience. This is something that will become increasingly evident in the next decade and beyond, and in truth there is very little that offline operators can do about this.

Quite simply, offline casinos and betting shops have minimal scope to evolve further, and this is in stark contrast to their online rivals. While corporeal outlets can borrow heavily from innovation and use this to modernise their proposition in part, for example, we’re set to see concepts such as virtual (and augmented) reality elevate online gambling onto an entirely new dimension in the next few years. This type of evolution is crucial, as it captures the essence of corporeal gambling and replicates in a virtual setting, arguably rendering offline establishments as completely obsolete.

Given that offline casinos struggle to compete with this technology now, their position is likely to become untenable with the passage of time.

How Will Regulatory Challenges Constrain the Market?

As if these challenges were not enough, offline casinos must also deal with the considerable threat posed by proposed regulatory changes. This is particularly true in the UK, where the Digital, Culture Media and Sport (DCMS) department of the government is pressing ahead with plans to cap the maximum wager associated with fixed-odds betting terminals (FOBTs).

These betting machines, which currently generate around £1.7 billion per annum and account for more than 50% of all profits earned by bookmakers, allow users to wager up £300 every minute. This is based on a maximum individual stake of £100 at present, and Culture secretary Matt Hancock is pledging to slash this to just £2 nationwide.

Such a significant cap would send shock waves throughout the industry, especially as market leading bookmakers were initially braced for the maximum wager threshold to be reduced to £50. Not only this, but initial estimates suggest that a £2 cap would make up to 9,000 betting shops in the UK immediately unprofitable in 2018, with the vast majority of these outlets facing closure by the end of 2020 without significant intervention.

This represents a seminal and ground-breaking development, and one that has polarised opinion among commentators. While campaigners have suggested that FOBTs deliberately target vulnerable individuals and problem gamblers, for example, others have claimed that such an extravagant regulatory change is unwarranted and extremely interventionist. Some have also pointed to the damage that this would do within a still-prosperous industry, with the move likely to cull thousands of jobs and lower the amount that is reinvested into the economy.

Given the lucrative and popular nature of FOBTs, it’s also fair to say that a drastic reduction in the maximum wager could force operators to realign their focus in the years ahead. More specifically, it’s increasingly likely that they’ll start to withdraw from their offline marketplace and invest more in developing their online hubs and platforms. We may well see divert more of their attention online in the future anyway, but marginalising FOBTs as a viable source of income would hasten this process and potentially represent the beginning of the end for the sector.

The Last Word

Ultimately, the relentless rise of online gaming makes it hard to imagine offline establishments remaining relevant in the longer-term. This will certainly be the case if virtual reality revolutionises online gambling channels, as this will represent that final frontier for online gaming and dramatically diminish the demand for land-based casinos and bookmakers.

The idea of capping the FOBT betting thresholds at just £2 will exacerbate an already challenging situation for offline operators, however, while it could effectively render corporeal gambling obsolete far quicker than anyone would have anticipated.

After all, if large numbers of betting shops close and certain revenue streams become unprofitable, operators may well be compelled to change their business model and make a full transition online. This would make a great deal of sense, while almost certainly ushering us towards the end of gambling as we know it in the UK.